The pension system is unsustainable but increasing the retirement age should be “the last thing to consider ”, according to the Malta Institute of Management.
“While encouraging the elderly to remain productive and to share their experiences with the younger generations may be healthy to some and definitely a right, this should be totally voluntary,” the MIM said.
The group said it was unfair to force people to continue in employment after they contributed their entire working life and now had specific necessities. “Many professionals nowadays choose to continue in their professional lives but want the necessary assurance of a pension as many do reduce their working times.”
The MIM suggested the introduction of incentives, such as tax exemptions, for people and their employers to contribute to voluntary (third pillar) pensions. “However, this has to be done respons-ibly and with proper education that allows for contributors to understand the schemes they are investing in,” the MIM said, pointing out that often contributors fell victim of wrong investment strategies due to inappropriate inform-ation.
Pension schemes should be strictly regulated and monitored by the appropriate authorities. The MIM called on the government to set up a pension fund through an interest-free loan, co-managed with the private sector, which would invest itself in order to ensure the necessary income for pensioners.
“It must be a prudent and conservative investment strategy, possibly in activities in the Maltese economy. All current and future or a considerable part of the contributions will go towards the ring-fenced commercially managed fund.
This, in itself, will already improve the situation that the country is in at the moment. The funds for such an interest-free loan may be generated through alternative financing methods existent and used in many countries.”
The MIM said it was “neither thinkable nor imaginable” to burden employees or employers with a compulsory second pillar, given the economic climate. Second pillar pensions could become an administrative nightmare with prohibitively expens-ive costs.
The MIM also recommended setting up a Permanent Commission for the Review of Pensions, besides the Pensions Working Group already in place, to constantly monitor and suggest improvements to the founding criteria over the years.
The Malta Employers’ Association has already said the second-pillar pension should not be introduced due to negative economic consequences.